Government at odds with PAC over tax gap

by Calum Fuller

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04 Mar 2014

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Margaret Hodge ourcreativetalent flickr photostream

THE GOVERNMENT has dismissed a raft of recommendations from the Public Accounts Committee over the reporting of HM Revenue & Customs' accounts and the tax gap.

In a set of minutes from a meeting held last week, the government waved away suggestions the taxman should "be more explicit" about the limitations of the current measure of the tax gap and gather greater intelligence about the value of tax lost through avoidance.

The government, though, insisted the gap "measures compliance with existing tax law and is informed by the intelligence the department gathers on the use of avoidance schemes. It does not cover how much tax might be paid if tax laws were different".

The latest set of figures, released in October last year, stands at £35bn, proportionally down to 7% of tax due.

The committee, led by Margaret Hodge (pictured), has proven controversial in recent years over the abrasive nature of its hearings and its increasingly strident rhetoric over tax issues.

Other PAC recommendations to receive short shrift from the government included calls for HMRC to demonstrate it deals "robustly" with individuals and companies deliberately misleading it by pursuing more prosecutions. In particular, the PAC has been keen to action against multinational businesses such as Google, Amazon and Starbucks, which have received regular criticism for their affairs.

Criticism was levelled by the PAC, too, over the impact actions seeking to make the UK more attractive to business may have. The government again disagreed with the PAC, noting "the department already makes extensive use of behavioural insight when formulating policy advice and designing tax legislation".

One point of agreement, however, was the massive over-estimation made by HMRC over the yields expected from UK holders of Swiss bank accounts, something the government agreed ought to be pursued more aggressively.

The government said: "The UK-Swiss agreement is raising revenue that would otherwise largely remain beyond the reach of UK authorities. The department continues to rigorously press the Swiss authorities to understand why receipts are lower than originally expected by either country. The department will also make full use of the enhanced exchange of information provisions under the agreement to identify ongoing evasion, and is contacting every person whose details were disclosed under the agreement to ensure that all tax, which should be paid, is paid."

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